GM to shift overseas operations from Shanghai to Singapore

The Financial Times, November 13, 2013

By Jeremy Grant in Singapore

General Motors will shift the bulk of its non-Chinese international operations from Shanghai to Singapore in 2014, marking a coup for the Asian city-state as it lures an increasing number of multinational companies with tax breaks and other incentives.

The Detroit-based carmaker said it would locate 120 staff in Singapore to oversee markets in the Association of Southeast Asian Nations (Asean), Africa, India, South Korea and the Middle East, as well as the European operations of Chevrolet – its best-selling brand – and Cadillac, its luxury marque.

The shift is the latest success in Singapore’s efforts to encourage multinational companies to establish regional headquarters, as it takes advantage of companies’ desire to tap into the region’s rapidly growing markets.

It also marks GM’s return to Singapore after a decade. The company moved its Asia-Pacific headquarters from Singapore – where it had been since 1993 – to Shanghai in 2004.

That coincided with the rapid emergence of China’s car market, where GM around that time started selling more units of its Buick brand than in the US.
By making the decision to shift its “consolidated international operations” (CIO) to Singapore, GM is in effect carving out a separate unit from its now much larger businesses in China and South Korea.

GM said decisions about its CIO markets would now be made “in the interest of growing our business while allowing us to focus even more intently on China”.
The company plans to retain 250 staff in Shanghai to oversee China, while 245 staff will remain in Seoul.

GM’s light vehicle sales in China have risen by an average annual rate of 27 per cent over the past five years, from 1.1m units in 2008 to almost 3m in 2012, making the country its largest market.

Its operations there include four manufacturing joint ventures, an research and development centre and four sales and service operations. “GM has achieved a very deep level of localisation in China,” said Bill Russo, a Beijing-based automotive consultant.

Stefan Jacoby, vice-president at the CIO unit, said of the shift to Singapore: “It will help us to create a renewed identity . . . and lead GM’s umbrella strategy for the region. We are looking forward to being an important part of the Singapore business community.”

The 10-nation Asean bloc, of which Singapore is a member, is home to a population of about 600m and has a combined gross domestic product just behind those of China and Japan.

Singapore ranks among one of the most business-friendly cities in the world, offering a corporate tax rate of 17 per cent, political stability, a UK-based legal system and sophisticated financial services.

Consumer goods companies, whose revenues are increasingly coming from emerging markets in Asia such as Indonesia and Vietnam, have also been expanding in Singapore.

McDonald’s, the US fast food company, recently upgraded its regional hub there as the operational base for Asia, the Middle East and Africa.

Procter & Gamble runs its global Pampers nappies business from Singapore, and is poised to open a research and development centre in March that will be the largest commercially run such facility in Singapore.

Rival Unilever, maker of Dove soap and Lipton tea, operates a global operations hub out of the city-state, where it bases its group chief operating officer.

Similarly, suppliers are also expanding in Singapore. In June, Givaudan broke ground for a new fragrance manufacturing facility and “perfumery school” in Singapore to develop scents and flavours that cater to Asian preferences.

However, some foreign companies are having increasing difficulty hiring workers with certain skills after the Singapore government this year tightened up on the influx of foreign workers.

Additional reporting by Tom Mitchell in Beijing

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